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Robocalls: Is a Solution Finally at Hand?

Posted on May 4, 2020
Roxanne Bland
Roxanne Bland

Roxanne Bland is Tax Notes State’s contributing editor. Before joining Tax Analysts, Bland spent 17 years with the Multistate Tax Commission, where she worked with state revenue agency representatives to draft model legislation pertaining to sales and use taxation and corporate income, analyzed and reported on proposed federal legislative initiatives affecting state taxation, worked with legislative consultants and representatives from other state organizations on international issues affecting states, and assisted member state representatives in federal lobbying efforts. Before that, she was an attorney with the Federation of Tax Administrators for over seven years.

In this installment of The SALT Box, Bland considers a possible solution to robocalls. Finding challenges for federal and state regulators in determining which robocalls are protected under the Federal Trade Commission, she argues that the best approach to curbing unwanted robocalls may indeed lie with the private sector, and not the state revenue agencies.

Robocalls — no one can deny they’re a nuisance. For me, one positive result of the lockdown caused by the novel coronavirus crisis is that it seems like telemarketing businesses responsible for the robocalls aren’t making them. During these past few weeks, my phones have been blessedly silent. Before the lockdown, they rang incessantly — after a quiet weekend, I knew Monday had rolled around when my phones would start ringing promptly at 8 a.m. Judging from the few messages the robocallers left on my voicemail service, the calls are usually from telemarketers that want to sell me something, like a home security system, vacation plans, or a warranty for my car. What’s most vexing is that I get robocalls even though all my phone numbers are listed on the “do not call” registry maintained by the Federal Trade Commission. In fact, under the FTC rules, whether the receiving phone number is listed in the registry or not, telemarketing calls with pre-recorded messages are prohibited unless the receiver has clearly given the telemarketing company written permission to make the calls or has previously established a business relationship with the company. There are other rules telemarketers must follow, such as providing, at a minimum, an origination number on the receiver’s caller ID service, and connecting the robocall to a sales representative within two seconds after the receiver’s recorded greeting has concluded.1 Of course, not all telemarketers comply with the FTC rules.

Robocalls are a huge problem. According to YouMail, a California company that distributes a consumer-facing visual voice mail and robocall-blocking app for wireless phones, 4.1 billion robocalls were placed in the United States in March. That averages out to 12.5 calls per person, per day. Moreover, the March numbers represent a precipitous drop from February, when well over 4.8 billion calls were placed.2 Presumably, the drop in the number of robocalls placed between February and March is a result of the current health crisis. However, it’s important to note that not all robocalls are illegal. Alerts and reminders, payment reminders, debt collection notices, purely informational calls, and a few other types of robocalls are not prohibited by the FTC rules.

YouMail’s robocall index shows that the largest percentage of robocalls — 41 percent — originate from scammers.3 Indeed, the advent of internet-powered phone systems has made it easy and cheap for scammers to originate calls from anywhere in the world, and to evade law enforcement by providing false caller ID information. Scammers use several tactics to fleece their victims, including pretending to be from the Social Security Administration, the IRS, or the Census Bureau. Today, however, the scammers’ tactics are especially egregious, playing on the public’s fears about the ongoing health crisis. The FTC has received reports of scammers offering COVID-19 test kits to Medicare recipients, kits for coronavirus prevention and cures, other virus-related Medicare benefits, and offers of cash grants related to the pandemic.4

Fighting Back

There is an effort underway, spearheaded by the United States Telecom Association (USTelecom), a nonprofit organization representing U.S.-based telecommunication-related companies, to stop the billions of illegitimate robocalls being made, or to at least put a significant dent in those numbers. USTelecom counts among its members large and small communications providers, from AT&T and Verizon to Ironton Telephone and Kalida Telephone Company. Together, USTelecom and its members have formed the Industry Traceback Group (ITG), which comprises communications companies providing wired, wireless, VoIP, and cable services. Operating under section 222(d)(2) of the Communications Act,5 which permits “carriers to disclose and/or permit access to customer proprietary network information if suspected fraud, abuse or unlawful use of services exists,” the ITG is a platform for communications companies to “trace and identify the source of illegal robocalls.”6 The traceback process begins with a terminating service provider that possesses information about suspicious phone traffic. The call is then traced back through the various communication provider networks until it reaches a nonresponsive communications provider or the originator of the call. This information is shared with federal and state law enforcement agencies. According to the 2019 USTelecom Progress Report, approximately 110 tracebacks were conducted per month, which translates to robocall campaigns responsible for “tens of millions of calls.” USTelecom also collaborates with YouMail, which identifies the most prolific robocall campaigns, enabling the ITG to focus its traceback efforts to locate the source.

The effort appears to be working. Alex Quilici, CEO of YouMail, directed me to a recent article in The Wall Street Journal reporting that on March 13 YouMail picked up a surge of calls that mentioned novel coronavirus testing kits. On March 17 U.S. communications companies traced the calls to a Philippines VoIP provider. ITG notified the provider, which responded within 24 hours that it had cut off services to the customer responsible for the calls. Moreover, YouMail reports that between March 17 and March 18 the volume of robocalls pitching the testing kits had dropped 75 percent, and after March 20 they had almost disappeared.7

Taxing the Problem Away?

It has been suggested that imposing a tax on robocalls might reduce the volume of calls, if not eliminate them. In Vermont, the House Committee on Ways and Means introduced H. 931, a skeleton bill that would impose on communications service providers a $1 tax on every illegitimate robocall under the Telemarketing and Consumer Fraud and Abuse Prevention Act.8 Section 6103 of the act gives states the authority to pursue civil action against the person or company from which the robocalls originate in federal court.

One glaring problem with the bill is whether the state can enforce it, since many of these calls originate overseas. Yet, according to Quilici, it seems the bigger problem with this bill is that it is “unworkable.” For example, he said, “a customer gets a call from Citibank to remind him that he didn’t pay his bill. The customer Citibank is trying to reach had his number changed but didn’t notify Citibank, so Citibank is making a robocall to someone with the number previously assigned to the customer. Though Citibank didn’t know the number had changed, it’s made a call to someone without their consent. Is that a violation of the [federal act]?” Given this, Quilici added, if the call was in violation of the act, under Vermont’s bill, Citibank’s communications provider would be liable for the tax, even though the robocall was inadvertent through no fault of Citibank. “That leads to all kinds of crazy lawsuits,” he said.

Further, there are questions as to “was it illegal, did the customer give written consent, or whether the call was made by an auto-dialer,” Quilici explained, adding that “it’s not an easy thing to figure out.” He gave another example in which “the Red Cross makes a robocall for a blood donation, but the person has revoked his consent. How does the carrier know that consent had been revoked?”

“There are a zillion examples like this. That’s why it’s a minefield,” Quilici said, and that’s why the traceback solution “is the most hopeful.”

Conclusion

Without a doubt, the sheer number of robocalls made on a daily, monthly, and yearly basis is a scourge that cries out for a solution. The difficulty is that under federal law, many types of robocalls are legal, making it difficult for federal and state regulators, as well as communications providers, to tell which is which. An effort that is bearing fruit is one in which communications providers trace back an illegal robocall to the originating provider or the provider’s customer. This information is passed to federal and state regulators, which can then notify the provider of the illegal activity. In several cases, the provider is either shut down or its customer’s account is terminated. There is ample evidence that this approach works, and works well. In one scam that peddled coronavirus testing kits, once the calls were traced back, within days the percentage of robocalls dropped precipitously, and then dropped further until the calls had nearly stopped.

Vermont believes a solution lies in taxing the communications provider responsible for letting the robocall go through. However, there are several problems with this approach, with one commentator calling it unworkable, and a Vermont legislator calling the state’s approach unenforceable. It seems, then, that the best approach to curbing unwanted robocalls lies with the private sector, and not the state revenue agencies.

FOOTNOTES

1 16 CFR 310.

2 YouMail Robocall Index, available at https://robocallindex.com/

(visited Apr. 14, 2020).

3 See supra note 2.

4 FTC Consumer Information Sheet, Apr. 10, 2020, and Apr. 14, 2020.

5 47 U.S.C. section 222.

6 USTelecom, “The USTelecom Industry Traceback Group” (undated).

7 Ryan Tracy, “How Enforcers Curtailed a Coronavirus Scam,” The Wall Street Journal, Apr. 5, 2020.

8 15 U.S.C. section 6102.

END FOOTNOTES

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